Thanks to an extremely fortuitously timed stock-option repricing (exchange), Googlers have made a killing in the past eight months at shareholder expense.
Option repricing is usually a colossal rip-off, a way of taking something that is supposed to be incentive-based compensation and transforming it into a heads-employees-win, tails-shareholders-lose guarantee. And so it was here.
Google’s stock is now nearing its peak again, a mere two years after tumbling with the rest of the market. Given that options are supposed to be a long-term compensation incentive, and given that Googlers have perks most workers can only dream of (starting with a robustly healthy and profitable employer), shareholders might have hoped that the company would at least wait a few years before transferring so much shareholder wealth directly to its employees.
Of course, one mitigating factor here is that those shareholders include Larry and Sergey. So they’re taking the hit as well.
AP, SJ Merc: A day before stocks bottomed in March, Google let almost 16,000 of its workers exchange their stock options. It turned out to be the deal of a lifetime.
The average exercise price for the options held by non-executives was around $521 a share at that time. But Google’s shares were trading closer to $308 each, making the options all but worthless. So, Google repriced the options to where its stock closed on March 6.
Then something surprising happened. Like the broader market, Google’s shares began to soar. Now, the stock is around $590, and each option has a profit of roughly $280. That amounts to a potential windfall for employees at the Internet search company of more than $2 billion.